STUDY OF BRAND

PARENT BRAND
McDonald’s
Core Values
Good Food
•  Promotes choices
•  Real ingredients
•  Great taste
•  Transparency

Good Neighbor
er
Good People •  Keeps families togeth
•  Creates opportunity through Ronald
•  Encourages diversity McDonald House
•  Facilitates teamwork Charities
t
•  Rewards achievemen •  Uses less energy
•  Recycles more
 McDonald's
Burgers and wraps

Breakfast Dessert

Munchies
 HIGH QUALITY, INEXPENSIVE COFEE
BRAND
EXTENSION

•  Internationally, McCafés are housed within

McDonald’s outlets but have a separate look and
feel. These stores are more bold and sophisticated
as compared to the McDonald’s outlets
•  The same format is being followed in India, where
a McCafé store typically occupies 500 sq. ft. of a
4,000 sq. ft. McDonald’s outlet
•  Presently McCafé has 27 outlets in India in major
cities like Mumbai, Pune, Nasik and Ahmedabad
•  It plans to expand aggressively and open close to
250 stores in the next 3-5 years
•  McCafé is able to tap the advantage of McDonald’s
excellent store network and supply chain

TARGET SEGMENT: more diverse segment of the population that favors

convenience, speed and lower prices.
INDUSTRY OVERVEW
Organized Café Market in India
 Café Food Café Beverages

GROWTH OF ORGANIZED CAF´E MARKET IN INDIA

•  The café market (organized sector) grew at a CAGR of 8.24% in the last 5 years

•  Within this market, the food segment, experienced a growth of 8.06% while the beverages
segment grew at a rate of 8.71%

•  However, the proportion of food in relation to beverages has declined over the years
 Market share
Café Coffee Day
Café Coffee Day (1.3%)
(1.3%)
Coffee Day Xpress
Coffee Day Xpress
(0.2%)
(0.2%)
Costa Coffee (0.1%)
Costa Coffee (0.1%)

Barista Coffee Co
Barista Coffee Co
(0.1%)
(0.1%)
Others (98.3%)
Others (98.3%)

2013: Market size INR 17.6 Bn 2014: Market size INR 19.2 Bn

Key observations:
•  Stand alone cafés and the unorganized sector constitutes majority of the market for
cafés and bars in India ~98%
•  In the organized sector, Café Coffee Day, Barista and Costa Coffee together comprise
1.6%
•  Starbucks and McCafé are relatively new to the Indian market and occupy a very small
part of the market. With their rapid expansion, however, they are slowly capturing the
market with their USP – “Affordable luxury”
 SEGMENTATION
MARKET
MARKET
SEGMENTATION
Geographic
segmentation

McCafé has chosen to

target urban cities in
well-established
countries such as
Australia, the US,
Japan, China, Spain,
India etc.
segmentation
Demographic

•  Demographically, McCafé considers young adults with relatively high disposable

income (annual income above 5,00,000) and adults in the working population.

•  These consumers look for  a laid-back environment with comfortable

surroundings, exquisite furnishings, and an artistic ambiance in a coffee house.

•  The TG is aged 25-39. Many within this group have young families. McCafé are
designed to offer them a place to meet friends and enjoy a quality coffee experience
as well as keep the children fed and entertained
Behavioural
Occasions Regular
Benefits Speed & Quality
User Rate Light to medium
Loyalty Low to Medium
status

Psychographic

Lifestyle People with a hectic

schedule, looking for
convenient options
Personality People who are not very
brand conscious
4 Ps of Marketing - McCafé

PRODUCT
McCafé offers a wide range of café
products – Coffee, frappé, iced drinks,
pastries and sweets, cookies, cakes etc.
Their offering range is at par with other
cafés in the consideration set (Starbucks,
Costa, Barista etc.). The product is high
on quality and taste.

The following range of products is

offered at a McCafé outlet
•  Classic coffee
•  Frappé
•  Iced coffee
•  Iced Tea
•  Smoothies
4 Ps of Marketing - McCafé

PLACE
McCafé, internationally and in India
are housed within a McDonald’s
outlet, where a separate area is
demarcated for the Café. Because of
this, it is able to make use of
McDonald’s established network.
However, even within the traditional
McDonalds store, McCafé offers a café
style environment. The company aims to
open at least 1 McCafé outlet within a Map of Mumbai
radius of 2 kms.
44Ps
Psof
ofMarketing
Marketing--McCafé
McCafé

PRICE
McCafé offers ‘value for money’ coffee without compromising on the
quality front. It is priced 15-20% below its competitors.

PRODUCT OFFERING COMPARISON

Category McCafé (INR) Starbucks (INR)

Classic coffee 135 185
Frappé 145 185
Ice coffee 115 150
Ice tea 105 170
Smoothies 180 250
44Ps
Psof
ofMarketing
Marketing--McCafé
McCafé

PROMOTION
McCafé is yet to promote itself more in
India. Globally it promotes the brand
through coupons, premiums,
advertisements on billboards and
television
Example-

‘McCafé Social Hour – Buy 1 Get

1 Coffee Free between 3-5 pm’
 McCafé Television Commercial

The ad emphasizes on how McCafé has strived to provide the best

coffee for it’s customers. It reinforces its concern for its customers
and the quality of its offerings. (play the ad by clicking on the arrow)
McCafé: Morning Person Challenge

McCafé in order to promote it’s coffee, created this challenge where it invited a few
people who hated getting up early in the morning. It made these people stay together in a
hotel. Next morning, they were woken up at 6 a.m. and were taken to a McCafé outlet
where they were served with coffee. While they kept cribbing on the way to McCafé, they
noticed a sudden change in their moods after consuming breakfast with McCafé coffee.
BRAND POSITIONING
Value Proposition
“VALUE FOR MONEY COFFEE”

Daily chit-chats Cup of coffee with a book

Intimate
connections

Informal set-up
Comfortable environment No pretense
Value Proposition

BFFs Father, mother, children Older couples Siblings

Writers & Artists Professionals Study groups

Value Proposition

“THE INTER-WOVEN EXPERIENCE”

Conversations linger on after a McDonald’s meal at McCafé

Competitive Frame of Reference

Hot Beverages

Tea Coffee
Points of Parity & Points of Difference

POP POD
Value for money
co ffee
Café style environ
ment
Family friendly –
Th
same restaurant h e
as
food (McDonalds
Menu: Freshly br ) and
ew
coffee, smoothies, ed coffee (McCafé)
cakes
etc
Modest environm
ent
High quality train
ed
staff
Self - service
 Perceptual Map

Established (Many outlets)

Mass Premium
(Convenience & (Status symbol)
functionality)

Emerging (Few outlets)

Starbucks vs McCafé
Target Group

•  Almost half of Starbucks' total business comes from its

primary market target if men and women ages 25-40.
•  These professionals tend to be professional urbanites
with high incomes who are interested in socially
responsible and environmentally friendly policies
•  They consider Starbucks logo as status symbol and
want to be associated with it
McCafé's target group appears to overlap with
Starbucks' to some extent: those interested in the
specialty coffee market, but at a more affordable price -
so perhaps not as high quality.

Advantage Starbucks has over McCafé Advantage McCafé has over Starbucks

•  First mover’s advantage: Since McCafe entered
the market after Starbucks, will will need to
offer something compelling to attract
Starbuck’s loyal customer base
•  People who prefer super premium coffee and
see Starbucks as a status symbol are not a part
of McCafe’s TG
•  The well established McDonald’s brand:
When the brand is well known, the
possibility of a brand extension being
successful is high
•  Affordable premium coffee
•  Food options at McDonald’s
BRAND BUILDING
The Brand Resonance Model
The model

4. Relationship: What about you and me?

Resonance

Judgment
Feelings

3. Response: What about you?

2. Meaning: What are you?

Performance
Imagery

Salience
1. Identity: Who are you?
#1 SALIENCE
The target group is well aware of
the parent brand ‘McDonald’s
which fares high on Top-of-Mind
Awareness (TOMA). McCafé on
the other hand is yet to gain
awareness because of existence of
outlets in very few cities, shorter
brand history and lack of
promotions and advertising (in the
Indian context)
#2 PERFORMANCE
McCafé fares very well on this parameter. The range
of products offered is at par with other coffee houses.
The product is basic coffee (with variants), that is
high on quality and taste. McCafé offers quick and
effective self-service. The offerings are more
economical and are around 20% lesser than peers

#3 IMAGERY
McCafé is perceived as a “convenient, reliable, ready-
to-go” brand. It performs well when the experience of
having a coffee is not as important as the functional
benefit
#4 JUDGEMENT
Being a relatively new player, McCafé lacks the
perception of authenticity in the market. It has a lot
of equity building to do to.

#5 FEELINGS
McCafé arouses the following feelings among the TG:
•  No warmth (weak and distant customer
relationship)
•  Security (trust in quality of offerings)
#6 RESONANCE
McCafé is far from this stage of brand loyalty. It can
build resonance through loyalty programmes and
community engagement. It will have to pass through
the previous 5 stages of the Brand Resonance Model
to reach this stage where people can completely
identify with the brand
SUMMARY
Parent brand – Brand extension -
Offering: specialty coffee
McDonald’s McCafé
market, but at a more
affordable price

Industry
scenario: Product: Specialty coffee Target Group: More diverse
Organized café Price: semi-premium segment of the population that
growing at Place: Housed within a favors convenience, speed and
8.24% CAGR, McDonald’s lower prices. (for full market
beverages Promotion: TV ads, segmentation, refer to slides
growing faster challenges, schemes 12-14)
than food

POP: Menu offerings,

Value proposition:
quality service, trained
No pretense, bonding Brand Resonance: The brand
staff
over a cup of coffee. needs to achieve Salience
POD: Value for money
The McDonald’s (awareness and
coffee, modest
experience lingers on
environment, family
to McCafé.
friendly
References
•  Euromonitor: GMID database
•  McDonald’s annual reports
http://www.aboutmcdonalds.com/mcd/investors/annual_reports.html
•  Business Standard -
http://www.business-standard.com/article/companies/mcdonalds-to-open-100-
outlets-of-mccafe-in-india-115042000958_1.html
•  The Times of India
http://timesofindia.indiatimes.com/business/india-business/Beverage-boost-
McDonalds-to-roll-out-McCafs-in-India/articleshow/23850835.cms
•  First Post
http://www.firstpost.com/business/starbucks-watch-out-mccafe-is-coming-for-
you-with-cheaper-coffee-1163753.html
•  VCC Circle
http://www.vccircle.com/news/food-agri/2013/10/09/mcdonald’s-forays-
coffee-shop-market-india-through-mccafe
•  http://businesscasestudies.co.uk/mcdonalds-restaurants/staying-ahead-in-a-
competitive-environment/the-mccaf-concept.html#axzz3fT6WMS8T
•  http://www.huffingtonpost.com/ladan-rafii/the-starbucks-or-mccafe-
c_b_4262104.html?ir=India&adsSiteOverride=in
The project is a part of Brand Management course.

It has been completed under the guidance of

Prof. Sameer Mathur

Indian Institute of Management Lucknow: Marketing Professor 2013-

McGill: Marketing Professor (2009-13)
Carnegie Mellon: Ph.D. and M.S. (Marketing) 2003-09
Thank You